FAQs - Frequently Asked Questions

What should I do if I can’t afford my student loan payments?
Contact your servicer to discuss your options.  You can switch payment plans at any time, so you should consider one of the income-driven plans or an extended payment plan.  You may be able to skip payments through a deferment or forbearance, but interest may continue to accumulate. If you’re having trouble, GreenPath can help you determine the best repayment options and then help connect you with your servicer.

Is it possible to lower my student loan payments?
It may be possible to lower your monthly student loan payment on federal student loans.  (Private lenders are not obligated to modify payment terms.)  You can switch federal student loan payment plans at any time. You may be able to skip payments through a deferment or forbearance, but interest may continue to accumulate.  Here’s a summary of the most common payment options for federal student loans:

  • Standard:  If you do nothing, this is the option you get.  Payment period is usually 10 years, but can range from 5 years to 20 years depending on the loan balance.  This option may make sense if you don’t owe that much or you have enough income to make larger payments.
  • Extended:  If you owe more than $30,000, you can stretch out payments for 25 years. But be careful — you can pay a lot more in interest if you choose a lower payment over a longer time period.
  • Graduated:  Payments start low and increase every two years. Graduated payments can be set up for a standard or extended time frame.
  • Pay As You Earn (PAYE):  Your payments are based on your gross income and household size, and are recalculated each year. After 20 years, any remaining balance can be forgiven.
  • Income Based Repayment (IBR):  If you have older federal loans and don’t qualify for PAYE, you might qualify for IBR.

How much would my monthly payment be with PAYE or IBR?
Check out the U.S. Department of Education’s payment estimator at www.ibrinfo.org and click on the orange box on the top right.  The estimator downloads your actual student loan data.  After you provide income info, it can estimate your PAYE and IBR payments.

What is a student loan servicer?
A student loan servicer handles billing and payment processing, provides customer service and implements repayment plans.  The U.S. Department of Education transfers your direct subsidized and unsubsidized loans to a loan servicer.  Some of the largest student loan servicers are Great Lakes, FedLoan Servicing, Nelnet and Navient (formerly Sallie Mae).

What is the difference between subsidized and unsubsidized federal student loans?
You pay no interest on subsidized loans while you’re in school.  So, what you borrowed should be what you owe when you begin repayment.  Interest always accumulates on unsubsidized loans.  When an unsubsidized loan enters repayment, it gets capitalized -- the loan balance will be higher than what you initially borrowed.

Why is the balance on my student loan much higher than the amount I borrowed?
If you have unsubsidized loans, interest charges begin when the loan funds are disbursed to you.  By the time you begin making loan payments, the loan balance will be more than what you initially borrowed.  Interest also continues to accrue on unsubsidized loans if you obtain a deferment or forbearance.  So, even though you aren’t required to make monthly payments during the deferment or forbearance period, your loan balance continues to grow.  (Interest does not accrue when subsidized or Perkins loans are deferred.)

Is it a good idea to defer payment on my loans as long as possible?
No, deferment and forbearance options should only be used if necessary for short-term situations.  You may obtain a deferment if you meet specific requirements such as being unemployed, on active military duty, or returning to school.  However, unless you have subsidized or Perkins loans, interest will continue to accrue and your balance will grow.  Forbearance also allows you to skip payments, but interest will always continue to accumulate.
How can I get my student loans forgiven?
If you work for a nonprofit organization or government agency, loans you received under the Federal Direct Loan Program MAY qualify for forgiveness as part of the Public Service Loan Forgiveness program. After making 120 qualifying monthly payments on qualifying direct student loans, while working full-time for a qualifying employer, the remaining balance on those loans may be forgiven.  If you have a Perkins or direct loan made prior to July 1, 2010, you might need to consolidate those loans in order to begin making qualifying payments.  Eligibility is based on numerous factors, so it is best to speak to your servicer or a student loan counselor to review your options.

What is loan consolidation?
Consolidation combines multiple federal student loans into one single loan with one monthly payment.  It has a fixed interest rate based on the weighted average of the interest rates on the loans being consolidated.  The process of consolidating federal loans cannot be reversed, so before consolidating make sure it’s the best option for you.

What are the advantages of consolidating my student loans?
It’s easier and simpler to deal with one loan payment instead of multiple student loan payments.  If you have variable interest rates, consolidation locks you into a fixed interest rate.  You can also lower your monthly payment amount by extending your repayment period from 10 years up to 30 years, depending on the size of your debt.  However, increasing the length of your repayment period will result in you paying more in interest --- potentially a lot more money --- over a much longer period of time.  You would also lose any benefits associated with the original loans.  If you need assistance, GreenPath can help you determine if loan consolidation is a good option for you.

Can I consolidate my private student loans?
Private student loans cannot be consolidated with federal student loans through the Direct Loan Consolidation program.  Private loan companies may let you include federal loans when you refinance private student loans.  However, this is a big decision.  When federal loans are consolidated into a private loan, you forever lose the federal repayment options (income-driven plan, deferment, forbearance, loan forgiveness, etc.).

What should I do if I have defaulted on my federal student loans?
Contact your servicer or the collection agency immediately.  They can assist you with options to bring the defaulted student loan(s) current.  When you are in default, additional collection costs are typically added to your loan balance.  Generally, two options may exist:

  • Student loan rehabilitation – After completing the rehabilitation program (usually 9 payments), the loans will be taken out of default status.
  • Student loan consolidation – If eligible, your servicer can consolidate your student loans into a new loan and this will take your loans out of default status.

What different types of federal student loans can I take out?
Students may borrow money from the government using direct subsidized loans, direct unsubsidized loans, Perkins loans and/or Grad PLUS loans (for graduate study only). Parents may take out direct Parent PLUS loans.

What is a Perkins loan?
Perkins loans provide money to students with exceptional financial need.  The interest rate is 5%.  Your school is the lender, but not all schools participate in the Federal Perkins Loan program.  These loans are not as common as other types of student loans.

What are my loan options for graduate school?
If you need to take out student loans to attend graduate school, you may be eligible to take out federal unsubsidized loans up to $20,500 per year. (There is a higher cap for certain training programs.)  For 2015-2016, the rates are 5.84% fixed.  If this does not cover everything, Grad PLUS loans are offered at 6.84% plus additional fees of 4.292% of the loan balance.  If you’re considering private loans, be aware that they sometimes offer variable interest rates that could increase over time.  And it is typically much more difficult to adjust repayment terms.